Will you get a pension….No? I’d thought so!!

I come from a very average middle class family where my father spent about 35 years of his life in the Indian Air Force at a salary which met the basic needs of the family and just enough to scrape through to plan for the 2 biggest aims of his life….the marriage of his children and having his own house. It was never a luxurious life but then one filled with honor and dignity and the biggest comfort that he had was that post retirement he could to live with an assured monthly pension that would take care of his and my mother’s basic needs. He never had the need to worry for his old age and all he could probably think of was a few NSC’s or a few LIC policies for saving the spare cash, if ever he had any. Being from the forces and having a secure government job with him my ‘poor’ Dad was never very investment savy nor did he fully realize the critical importance of compounding.

Today, being in the private sector and having worked for almost 20 years now I can fully understand the importance of that assurance of a pension.

I started my investments at a relatively late stage and for the initial 5 years did not save anything to talk or write about….what came in went out every month….clothes, shoes, parties, girlfriends, beer….depending on the need of the day. It was party time and I lived up to it….when  my first income was Rs 1,250 I spent it all and whilst it grew to Rs 8,000 or Rs 15,000 the story was the same…..and my expenses went up walking hand in hand with the income.

But God was kind and I was in a span of the next 15 years able to save and invest enough that made up for the initial years….but I never could get over the guilt feeling of not having the sense to start saving my money or investing the same right from the first day. I feel that I could have probably doubled my savings (compared to what I have today) not on account of the sum of money invested but on account of the magical feature of compounding.

I feel it is of utmost importance for men and women to start becoming an investor from the very initial stages of their careers. Everyone has to meet their basic requirements and live a good life so it’s quite difficult to ascertain a particular figure that meets the standards but again on a personal note I feel that it is a must for every working person to save at least 20% of their monthly income in some form or another. So what I did is that each time that my salary would get credited I would the very same or next day invest 20% of it in funds, shares, gold or any other securities that happened to attract me.

That 20% could mean just Rs 1,000 or Rs 50,000 per month….that is irrelevant….but what was  essential was to take away that 20% and then plan for the rest of the expenses…if the month went well then I could save and then spend and if there were unforeseen expenses then I would save, spend and unlock my savings for that month….but then the sequence was always the same. And this sequence was very much to the opposite of what people generally do…..they spend and then save the balance whilst I would and still do save and then spend the balance.

I know it’s easier said than done…..but what choice do you have….I don’t have a pension coming in from the government and I assume that neither do you. One of the basic drawbacks people tend to have is that they tend to look into the past and see that the market (stocks, real estate, bullion) has already risen and hence feel that they have failed to capitalize on the prospects…..with that in mind many people tend to stand back and let their funds lie in the bank accounts with a sure shot chance that soon an expense will come their way and erode that surplus or savings.

As a policy I have earmarked my anniversary as date where I without fail make an investment in gold….it is an occasion and an excuse to buy gold ornaments which not only makes my wife feel good but also that I am making an investment for my daughters future marriage. I have been doing this for the last almost 10 years and bought gold when it was Rs 4k, Rs 7k, Rs 16k and my last purchase was at Rs 26k and each time that I would buy my wife felt I have bought when the gold had peaked making me the worst investor 🙂

The point is that I can never time the market….not do I think anyone else can. If we could then we would all be playing golf and not sitting in the offices doing the 9 to 5 routine and counting the pennies in our bank accounts. So, irrespective of where the market is I continue to look out for good opportunities to make an investment. Today (as I write this article) the share market has crossed the 20k mark and yet I bought some shares where I think the money will grow over the next 5-10 years timeline.

And the best time to invest (different from timing the market) is when the markets are spooked and jittery…..when just about everything is going wrong about the economy….when people are scared and willing to offload their stocks to stop or limit their losses…..but the ironically most people make the common mistake of coming into the market when its going hot and sell when they see the markets crashing. I do the opposite….the more the market falls the more I buy so when during the spook of 2009 when the markets crashed worldwide and everyone (well almost) was selling I was buying at each fall.

There is a very good book which I came across titled Rich Dad, Poor Dad….it’s worth a read and its one of those books that you understand better each time you read and reread the same. Most of the people commit the mistake of working for money…..the successful ones make money work for them. And the only way that you make money work for you is to save a bit and invest……

So, when is it a good time to invest….I’d say now!!